Global NAND flash memory market revenue fell 7 percent in 2012 as
Ultrabook sales negated the impact of surging demand from Apple for
its iPhone line, according to an IHS iSuppli research.

NAND industry revenue fell to $19.7 billion last year, down from
$21.2 billion in 2011. Revenue, however, will pick up this year and
rise to $22.4 billion after last year's stumble, and then continue
to expand during the next few years, as shown in the figure below.

"Because of its high-memory density, combined with high-volume
shipments, Apple's iPhone line in 2012 was the largest single consumer of NAND, helping to increase demand for the memory from
the smartphone market," said Michael Yang, senior principal analyst
for memory & storage at IHS. "However, Ultrabook sales fell short
of industry expectations, dragging down the overall NAND market for
the year."

The research firm said that iPhones consumed 10.5 percent of the
total NAND flash supply in 2012. In comparison, all other
smartphones combined used 10.4 percent.

The iPhone in 2012 had an average density of 24.5 gigabytes, a 19
percent increase in density loading compared to 2011. This
represents the highest amount of embedded NAND flash among all
smartphones.

A major drag on the NAND industry was the disappointing sales of
Ultrabooks, negatively impacting the flash memory prospects of
cache solid state drives (SSD) used in the superthin computers.
While Ultrabooks have had some success penetrating into the
consumer computing experience, adoption overall has been
underwhelming, and the incremental increase to demand has been
significantly below expectations.

And while SSDs achieved significant growth in 2012, the expansion
was diminished by the poor results for Ultrabooks.

Microsoft also didn?t help matters by deferring the launch of
Windows 8 until Oct. 26, which left little time to generate
interest among consumers and the corporate sector alike. As a
result, PC shipments in the third quarter last year saw a
substantial quarterly decline as consumers waited out the new
operating system, and high inventories of older Windows 7-based PCs
remained in the supply chain well into the fourth quarter.

Such mishaps, along with overall muted demand, prompted the NAND
industry to slow production midway through 2012. Suppliers took
action to prevent what would have been a disastrous year for all,
and a shrewd move to stabilize pricing in August ultimately led to
a minor rally in October. Even so, the second half last year turned
out to be weaker than expected despite solid results in the third
quarter, blunting growth and resulting in the contraction of
industry revenue by the end of last year.

NAND flash manufacturers will need to continue to tightly manage
their supply for the first half of 2013, as the first six months of
the year traditionally are the weak period for the industry. And
with the market moving away from low-margin applications like flash
cards and universal flash drives toward higher-value applications,
the success of NAND flash players will be increasingly dependent on
a smooth transition from acting solely as pure-play sellers to that
of providing complete solutions, IHS iSuppli believes.

The fate of the NAND industry in the near and intermediate term
rests on the support of three pillars of demand: smartphones,
tablets and SSDs.

Smartphones, for instance, historically provided important growth
in NAND flash bit demand. And while growth is starting to slow when
compared to the earlier boom years, the smartphone engine will not
run out of steam anytime soon.

In comparison, tablets have only recently become a major driving
force for NAND demand, with other tablet manufacturers and
operating systems beginning to give Apple's iPad some serious
competition.

For their part, SSDs are still in their nascent stage despite
making up a notable portion of NAND demand, as suppliers are still
waiting for the tipping point when consumers fully embrace the new
drives.

Moving forward, 2013 will mark the start of another expansion
period for the industry. Robust growth is expected, balanced with
technology advancements and production expansion. In particular,
the second half of this year will be healthy, boosted by increased
demand throughout the NAND portfolio.